It’s safe to say that taxes are a major concern for all Los Angeles-based small business owners. They represent a significant expense and making a small mistake on a business tax return can result in significant fees and penalties. And that is not even including the considerable emotional toll that can be taken by a government audit. Here are a few little-known tax tips that can help save LA entrepreneurs from some major headaches.
Buy Tax-Deductible Accounting Software
Sending in a return that doesn’t add up will greatly increase the likelihood of an IRS audit. Consequently, it’s a good idea to invest in a quality accounting software program. It’ll help you to keep track of all of your expenses and income of the course of the year and file properly tabulated returns when the time comes. Best of all, the cost of the software is tax deductible.
Invest In A Mobile Payment System
In recent years, the IRS has made a point to scrutinize returns sent in by restauranteurs, dry cleaners and other small business owners who operate in industries that are cash heavy. This initiative was started because the IRS wanted to crack down on entrepreneurs who under-report their cash-based transactions. If your business falls into that category, you might want to purchase a mobile payment system. Many of these systems allow merchants to keep cloud-based records for every transaction they process, regardless of payment type.
Provide Explanations For Uncommon Deductions
As the IRS deals with millions of small business returns every year, they have a good idea of what to expect in the way of deductions. If over the course of the year your business incurs an uncommon expense that you need to deduct, like the loss of significant inventory or equipment to a fire or storm, include paperwork in your return validating your deduction. Failing to do so is equivalent to putting a giant red flag on your return.
Be Conservative with Your Travel, Meal and Entertainment Deductions
On the subject of deductions, it’s also a good idea to make sure your travel, meal and entertainment deductions are reasonable. While a certain amount of these expenses are expected, excessive deductions in this category can raise the IRS’s suspicion. To avoid unnecessary scrutiny, abide by the government’s 50 percent rule and make sure any travel meal and entertainment expenses you deduct past the directly-related test.
The foregoing information is provided by City National Bank (CNB). Unless otherwise stated, opinions expressed are those of the respective authors and not necessarily those of CNB. The information is provided without warranty and no recommendation or endorsement by CNB is intended or should be inferred unless specifically stated.
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